As your browser does not support javascript you won't be able to use all the features of the website. We strongly recommend you to enable the javascript in your old browser's settings or download a new one.

Auto-Loan Bubble Endgame - Used-Car Prices Have Stalled

As auto-loan volumes explode (and terms are extended), many of the post-cash-for-clunkers herd are rapidly coming to the realization that the loan they are carrying (and increasingly not paying) is on a wasting asset. As Goldman Sachs notes, The Manheim Index measured 124.5 in March, essentially used-car prices flat yoy after four consecutive months of solid increases. On a sequential basis, the index posted a 0.5% decline in March, following a 0.2% decline in February, confirming Goldman's expectations for a correction in residual values going forward, driven by rising inventory in the off-lease channel... and this pricing pressure is likely to spill over into new car prices.

Non-revolving (auto loans dominate this cohort) spiked...

Just as Used Car prices start to roll over again... (for the first time since the financial crisis, 4-year price changes - average term then - are now negative)

Worse yet, the most popular compact car prices are down 5.2% YoY and mid-size down 1.9% YoY.

However, if there is further deterioration from here – either from a rapid used supply increase or waning retail demand – we could see pricing pressure spill over into new vehicles through a rise in incentives.

* * *

And of course, the subprimest of subprime are the new normal FICO score winners.